Only Part of This Market Appears to Be Out of Gas

by Sam Collins | September 24, 2013 2:11 am

Stocks fell Monday, but the selling was primarily focused on the Dow Jones Industrial Average, which lost 0.5%. Some industrials, most utility stocks and technology issues, rallied, but financials took a hit.

Apple (AAPL[1]) rose 5% following news of demand for its latest products, and BlackBerry (BBRY[2]) rose more than 1% after a tentative agreement to be bought out by Toronto-based Fairfax Financial at $9 a share.

At Monday’s close, the Dow Jones Industrial Average fell 50 points to 15,401, the S&P 500 was down 8 points at 1,702, and the Nasdaq lost 9 points at 3,765. The NYSE traded 690 million shares and the Nasdaq crossed 427 million. Decliners beat out advancers on both major exchanges by about 1.3-to-1.

After blasting to a new high on Wednesday, the Dow industrials have sagged and closed Monday almost on the first line of support, the upper band of a wide range from 14,785 to 15,400. Within the band is the important 50-day moving average at 15,304. MACD is turning down, as is momentum and RSI (not shown).

But while the Dow looks tired and due for a rest, the Nasdaq has barely felt the pressure of the profit-taking that has hit the Dow. The Nasdaq closed Monday just below its bullish resistance line at around 3,800, and is nicely above its bullish support line and 50-day moving average at 3,653. MACD is bullish.

Conclusion: Again, the small-cap and mid-cap stocks are leading the market. But the indices that traditionally ignite markets to major bullish explosions, the S&P 500 and Dow, have low momentum readings, even appearing to be “out of gas” (see Monday’s chart of the S&P 500[4]). And a close below the S&P 500’s 1,680 to 1,690 zone would be a negative jolt for the entire stock market.

But the Nasdaq and Russell 2000 are technically sound, and so the broad market will probably continue in the upper ranges of the support zones of each of these indices until late in October. A traditional Halloween treat may be the event that leads to another leg up.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here[5].